Buying A Home With Better Mortgage Disclosures To Help Buyers in the Twin Cities Make Better Informed Decisions

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On 10.2.2012, The Federal Trade Commission’s (FTC) posted a comment under housing and real estate to the U.S. Consumer Financial Protection Bureau (CFPB) on disclosure forms designed to help buyers regarding disclosures they receive when they apply for and close on a home mortgage loan.


Buying A Home With Better Informed Decisions: because buying a home is a big deal. buying a home with better mortgage disclosures


Home Destination sees many real estate buyers that find buying a home could use better-informed decisions because it can be too confusing. The FTC says, "The more consumers know about the home buying process before they start looking — either for properties or real estate professionals to help in the search — the more time and energy they can save".



Buying A Home Requires Understanding Features, Costs And Risks


The Federal Trade Commission’s staff submitted a comment to the U.S. Consumer Financial Protection Bureau on disclosure forms designed to help consumers understand the features, costs, and risks of home mortgage loans. The comment is in response to a CFPB Notice of Proposed Rulemaking regarding disclosures consumers receive when they apply for and close on a mortgage loan.


The FTC staff comment commends the CFPB’s efforts to develop improved mortgage disclosures that are designed to help consumers make better-informed decisions about mortgages. It states that the disclosures developed by the CFPB will likely improve the information that consumers receive under current federal regulations; they are generally simpler and less technical, and should be easier to understand. Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z) are currently in review by the CFBP. See document attachment below.


Home Destination can attest to the conclusions of the FTC Home Buyers Survey:


• About a fifth of the homeowners could not correctly identify the APR of the loan, the amount of cash due at closing, or the monthly payment.

• Nearly a quarter could not identify the amount of settlement charges.

• About a third could not identify the interest rate.


• About a third did not recognize that the loan included a large balloon payment; • A third did not recognize that the loan amount included money borrowed to pay for settlement charges.

• Half could not correctly identify the loan amount.

• Two-thirds did not recognize that they would be charged a prepayment penalty if they refinanced with another lender.

• Three-quarters did not recognize that substantial charges for optional credit insurance were included in the loan.

• Nearly nine-tenths could not identify the total amount of up-front charges.


Buying A Home Needs To Be Simpler And Less Technical:


"Federal Trade Commission (FTC or Commission) staff commends the CFPB’s efforts to develop improved mortgage disclosures that are designed to help consumers make better informed decisions about mortgages. Based on its own research and law enforcement experience, the FTC staff believes that the disclosures that current federal regulations require often fail to effectively convey the key information consumers need to make decisions about mortgages. FTC staff also believes that the disclosures developed and being considered by the CFPB will likely improve the information that consumers receive under current federal regulations; they are generally simpler and less technical, and should be easier to understand."


Features Of A Home


Determine how many bedrooms you need in the home you wish to buy. How many bathrooms you need, parking space, if you office and home and need a quite room to work, or if you need a sperate guest quarters for friends and family that you love to have visit. If a family member is handicapped, do they need special features? Is your family growing and you need yard space for a playground or swimming pool? Create two se per ate list before you begin your search to buy a home. One should cover "must-haves" and one can be for "would love to have".


What It Costs To Buy A Home


Real estate buyers benefit from clear disclosures before closing on buying a new home to fully understand all the costs involved that they are responsible for. The FTC websites says, " In 2007, an FTC staff study found that then-existing mortgage disclosures failed to convey key mortgage costs and terms to many consumers, and that better disclosures could be created to help consumers make informed decisions about mortgage products."


Closing Costs Fall Into Three Basic Categories:



types if closing costs 1 Charges for establishing and transferring ownership of the property.

types if closing costs 2 Fees paid to state and local governments..

types if closing costs 3 Costs to the borrower for gaining a mortgage.

Read more to gain help understanding buyers home closing costs.



Risks Of A Home Mortgage


There are risks to consider if you go with an ARM. You may be planning to move out of the house before the five or seven years the ARM is based on are up. There are higher risks while gaining the lower payments. Such home buyers should prepare to stay in their home longer than they planned, in case circumstances change. To gain a better understanding of risks you may be facing, foremost, ask good questions when with your lender and realtor.


Buyer Responsibilities When Buying A Home


A buyer's decision to purchase a home or seek to modify a home's financing, and the importance of mortgage disclosures in enabling buyers in the process of buying a home, is one of the most biggest decisions made in a life time. The FTC says,"In light of the significance of a consumer’s decision to purchase a home or seek other home financing, and the importance of mortgage disclosures in enabling consumers to evaluate the costs of the transaction, it is important to ensure that disclosures effectively enable consumers to evaluate the real costs of taking out a mortgage."


Buyers Responsibilities Include:


* Inspect the home and determine whether the home will be suitable for the buyer's use.

* The buyer should ask about any applicable governmental issues, such as building, zoning, fire, health, and safety codes.

* Pre-qualify for financing and obtain a conditional loan approval letter listing all conditions to financing from a reputable lender.

* Disclosed information that could adversely affect the buyer's ability to close escrow on the home or to complete the buyer's obligations under the mortgage terms.



More Choices When You Are Buying a Home


Home Destination helps home buyers search listings for a home in the local Multiple Listing Service (MLS),utilizing industry experience and networking relationships to learn of properties about to emerge on the market. Some times we use non-traditional sales models. The Federal Trade Commission (FTC), the agency that works for a competitive marketplace, says these new sales models for buying and selling a home mean more choices for home buyers. Additionally, as a Certified Distressed Property Expert (CDPE), if you are seeking to buy distressed properties, we can help.



Download the FTC Real Estate Settlement Act and better mortgage disclosures. The comments contained in the document represent the views of the staff of the Bureau of Consumer Protection, the Bureau of Economics, and the Office of Policy Planning. pdf




Check back for more tips on buying a home with better informed decisions. A buyer's agent can help you understand your responsibilities as a buyer. Home Destination can help you investigate a home in Minneapolis, St Paul, and surrounding real estate communities. Jenna provides direct links to many home-buying resources, information on how to buy a home with a quality mortgage, and most of the governmental agencies that have information on Twin Cites' homes.